Existing towns and cities should be expanded and the cap on some councils' borrowing lifted to allow more homes to be built, according to the man responsible for overhauling Labour's housing policy to ease the chronic shortage.

Sir Michael Lyons told the Guardian he had identified protracted delays in the release of land as the single biggest cause of Britain's housing crisis.

He is minded to recommend a new generation of "urban extensions", modelled on the postwar new-town expansion, insisting that while communities should have a say in planning, they cannot veto new homes in a time of severe shortage. The expansion of current conurbations, capable of using existing infrastructure, could be built as quickly as new towns, and lead to tens of thousands of new homes, contributing to a target of 200,000 new dwellings a year by 2020.

With his inquiry team reaching its first conclusions, which are due to be unveiled in detail in September, he told the Guardian: "The central issue is how do we release more land in this country – a country that has developed urban containment to ritualistic proportions and in a country that devotes more land to golf courses than it does to homes. It is a national problem that we collectively have to sort out.

"This belief in urban containment is rooted in a Victorian view of cities that they should not grow, they should not spread and they are full of problems when most of us would acknowledge that the future of the UK economy depends to a large part on the dynamism and growth of the cities."

The housing review is one of the five big policy decisions awaiting Labour, including funding of the NHS, a growth review led by Lord Adonis, the future structure of railways and its overall fiscal stance. Lyons, a former chairman of the BBC Trust and an economist, spent much of his career running local authorities.

Lyons insisted the demand for more housing was legitimate. "We are not serving our children and grandchildren well," he said. "We are not leaving them an adequate legacy of homes. Every community has a right to a voice about where new development takes place and what form it takes. What they cannot have is a right to a prohibition on the building of homes. That is simply intolerable in the common interest."

He said he wanted councils to build more homes so long as they were not competing with private developers and they should be freed from current constraints on borrowing to do so. "In England there is a specific cap on the council Housing Revenue Account (HRA). The overwhelming weight of the evidence that has come to us from public and private bodies, says 'for goodness sake lift the HRA cap'."

Lyons may recommend the cap on borrowing be lifted for councils with balance sheets that suggest they are fit to borrow more.

He said he was also considering:

• Increasing plans for shared ownership to help more people at least partially own their own homes.

• Introducing a transparent land registry to reveal the land agents, developers and hedge funds that were driving up expectations on land price by taking options on land liable for development.

• Finding a way for housing associations to unlock their balance sheets and work with the construction industry to build more homes.

• Introducing a new generation of Urban Development Corporations to build sizeable extensions on the edge of existing towns and cities.

The proposals would either require land to be sold close to its current use value or for private land owners to receive a lower initial profit, but receive more later by taking a financial stake in the development. "Almost all the many perverse behaviours in the UK housing market stem from the artificial shortage of land for development in this country" Lyons said.

House price inflation – at 9% a year – is widely seen to be destabilising the economy. Lyons suggested that the battle over planning should include building on greenfield sites: "I am very clear that where there is surplus public land and developable brownfield sites they all have to come forward, but these sources are not going to meet all the housing aspirations of this country."

Lyons He said he wanted to develop a model whereby the price at which land was sold to a partnership or UDC initially was lower, but the land owner could receive further income over time as the benefits of the development came through.

He said "I am interested in the proposition that the land owners are brought together into a partnership with the developer and the local authority. The land goes in at its current valuation as equity essentially, and people draw out of that as the development succeeds. So it is about getting people to put their land into a joint vehicle at the outset and then take their proceeds out after you have paid for the infrastructure and built the development, and achieved the increase in value."

The Lyons plans, due to be published in September, will be seen as controversial by some private landowners, but he has concluded that the system of land assembly for housing in the UK is broken and new partnership models have to be created if he is to draw up a credible grid showing how Britain can be building 200,0000 homes a year by the end of the next parliament.

Similar ideas were proposed this week in the shortlist to the Lord Wolfson economic prize on garden cities overseen by the centre-right thinktank Policy Exchange, suggesting there is scope for cross-party support.